How much income must usco include

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Question 1 An Indian corporation (IndiCo) is wholly owned by a US corporation (USCo). IndiCo purchases corn produced by USCo in the United States and resells it abroad. How is IndiCo's income treated for U.S. tax purposes if, alternatively:

A - IndiCo sells the corn to an independent distributor in India, which resells the corn to customers in Thailand. IndiCo directs USCo to ship the corn directly to the distributor's customers in Thailand. 

B-The corn is exported to a factory owned by IndiCo in Vietnam where it is popped and packaged. After this is complete, the popcorn is shipped to a Thai distributor where it is sold to retailers.

Assume that IndiCo is not subject to tax in India, Thailand or Vietnam.

Question 2 USCo owns 100% of a Canadian Corporation (CanCo) and 100% of a Mexican Corporation (MexCo). CanCo owns a portfolio of stocks that receives dividend payments of $75,000. CanCo also purchases umbrellas from an unrelated party and sells them to an unrelated party for gain of $25,000. Assume that the effective Canadian tax rate on CanCo's income is 40%. MexCo purchases toys from USCo and resells them in Mexico and Guatemala. MexCo receives $7,000,000 from the sales in Mexico and $300,000 from the sales in Guatemala. Assume that the effective Mexican tax rate on MexCo's income is 10%.

How much income must USCo include in its gross income in the current year?

Reference no: EM13248037

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